Quantitative Ratings on the Biggest and Most Important Companies Reporting Earnings This Week
This is a big week for investors.
The Federal Reserve announces its latest decision on interest rates – the overwhelming consensus is that rates will be left where they are – and five of the seven largest companies in the world report their quarterly results.
The average market capitalization for these companies is $2.1 trillion. Just five years ago, Apple (AAPL) became the first company to hit $1 trillion in value. Now it and Microsoft (MSFT) are both valued over $3 trillion.
We’ll hear from both this week, along with Alphabet (GOOGL), Amazon (AMZN), and Meta Platforms (META).
Think about the impact those five companies have had on our world… and our wealth. All five are up 50% or more since the beginning of last year, with META leading the charge after more than tripling in value.
It’s even more dramatic looking back over the last decade, with MSFT and AAPL both 10-baggers, with the other stocks rising at least 5X.
We should listen to the biggest companies in the world having the biggest impact on our world and generating some of the biggest profits in the world.
Let’s look at their Quantum Scores and ratings in my system heading into this important week, starting with the two companies reporting tomorrow. Ironically, both have identical ratings.
Alphabet (GOOGL) – Tuesday
Alphabet, the parent company of Google, remains the king of search and related advertising revenue. Its Quantum Score of 82.8 sits in the optimum buy zone between 70 and 85.
Source: TradeSmith Finance and MAPsignals.com
The company posts strong growth even with its massive size, with analysts expecting 51.4% higher earnings on 12.2% more sales. Alphabet’s profit margin is solid at 21.4%, and debt levels are low enough to not cause concerns.
GOOGL’s 25% run over the last three months has popped its Technical Score up to 91.2, which is borderline overheated. While it’s tempting to look at these scores like grades in a class, the Technical Score is one instance where you don’t want a perfect 100. The only place to go from there is down, and in the case of a stock, that means a pullback.
Alphabet is a dominant company that should continue to do well into the future. If you’re looking to buy, you may be able to grab it a little cheaper on a pullback as the technicals will inevitably cool a bit.
Microsoft (MSFT) – Tuesday
Microsoft (MSFT) is identical to Alphabet with its Quantum Score of 82.8, and the fundamentals and technicals are perfect matches as well.
Source: TradeSmith Finance and MAPsignals.com
Once again sales and earnings growth are solid for such a big company. Estimates are for earnings to grow 10.3% on a 6.6% bump up in sales. Adding to that is a healthy profit margin (34.1%) and acceptable debt at 38.5% of equity.
Valuation is not cheap but also not outrageous with shares trading at 35.8 times future earnings.
MSFT has also run up nearly 25% in the last three months, and my Quantum Edge system has picked up three Big Money buy signals here in January. That has vaulted shares into that nearly overheated zone with a Technical Score of 91.2.
That said, MSFT is a great company… and a great stock for the future. I own it myself. As with GOOGL, if you’re looking to buy, you might be able to get in cheaper on a pullback.
Apple (AAPL) – Thursday
As we shift to the three giants reporting on Thursday, we start with Apple’s so-so Quantum Score of 58.6. That’s below my optimal buy zone of 70 to 85, and its fundamentals at 58.3 are weaker than any of the other tech titans reporting this week.
Source: TradeSmith Finance and MAPsignals.com
Sales grew 9.4% in the last fiscal year (which ended in September), and analysts expect 3.4% growth this year and 5.6% next year. That’s not bad – and it’s real money when you’re talking about a company that brings in $400 billion annually.
But growth gets harder the bigger a company gets. Analysts expect 2.7% earnings growth on slightly lower sales than the fourth quarter of 2022.
I’m in no way saying that AAPL is a bad company or a bad investment. It’s an iconic company that is the biggest in the world and clearly one of the most influential.
But the data right now doesn’t give me confidence that big gains are ahead. If you have cash to invest, there are better opportunities out there.
Amazon.com (AMZN) – Thursday
Amazon rates higher than Apple but also comes in just shy of our target buy zone with its 67.2 Quantum Score. And if you look at the breakdown, most of that is from the technicals.
Source: TradeSmith Finance and MAPsignals.com
AMZN’s 25% rally over the last three months and four Big Money buy signals here in January have helped drive the technicals up to an 82.4 rating.
That’s a strong score, but my concern is how much it outpaces the fundamentals, which are the core of the business itself. Amazon’s 45.8 Fundamental Score is the lowest of the group. Earnings are improving, expected to jump from 3 cents a share one year ago to 74 cents a share in the just-completed fourth quarter. Sales growth is less dramatic at 2.5%.
In addition, profit margins may be improving but are still slightly negative (-0.5%), and debt is higher than I like to see at 106% of equity. In addition, the recent surge has shares trading a bit low at 59 times future earnings.
Amazon is a great company that’s involved in just about everything – possibly even too much. Here again, it’s not a bad stock at all, but I do see better opportunities elsewhere.
Meta Platforms (META) – Thursday
And that brings us to Meta Platforms, the company formerly known as Facebook. It posts a strong 79.3 Quantum Score supported by decent fundamentals and fairly hot technicals.
Source: TradeSmith Finance and MAPsignals.com
Analysts estimate some pretty impressive earnings growth this past quarter, with the consensus at $4.55 per share, up significantly from $1.76 a year ago. Sales are projected to grow 12%. Growth is expected to remain solid, with estimates for additional 22% growth in 2024.
It’s interesting how similar the technicals are for these huge companies. It tells us where a lot of the money has been flowing since the rally started last November. META’s 91.2 Technical Score is another one on the border of being overheated.
Looking at these scores, I’m struck less by the individual company ratings themselves – which aren’t much of a surprise – and more by how important technology is and will be to our world, our markets, and our wealth.
It’s the strongest sector in my Quantum Edge system, and it’s where I am focusing my recommendations right now. Our four biggest winners in TradeSmith Investment Report are tech leaders, and they’re up 50% for us on average.
I don’t expect that to change, so make sure you have plenty of exposure to the best tech stocks in the market with strong fundamentals, technicals, and Big Money inflows. Some pullbacks in the near future may provide great entry points. (Click here to learn more if you’d like my help.)
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends
Disclosure: On the date of publication, Jason Bodner held a position in Alphabet (GOOGL) and Apple (AAPL), mentioned in this article.